Contract chip packaging and testing to grow 110% in five years

SAN DIEGO -- Propelled by a new range of products and a major trend towards outsourcing, the worldwide IC-packaging and test market will grow by 110% over the next five years, according to analysts at the "Dataquest Semiconductors 2000" conference here this week.

The worldwide chip-packaging and test market is projected to grow from $25.5 billion in 1999, to $36 billion in 2000, to $53 billion by 2003, said analyst to Jim Walker, who tracks the industry segment at San Jose-based Dataquest.

The shift towards outsourcing is also on the upswing. In the past, chip makers handled the bulk of their own packaging and testing needs in-house, but now they are outsourcing more of their requirements to third-party packaging houses like Advanced Semiconductor Engineering, Amkor, Orient Semiconductor, Siliconware, and others, said Walker in his presentation before the conference on Monday.

Some 26% of all chip products were outsourced to third-party packaging houses in 1999, but that figure jumped to 29% in 2000, according to Dataquest. By 2003, about 38% of all chip products will be outsourced to third-party vendors, said the market research firm.

"By 2005, we will see that number climb to 40%," Walker said. "By 2010, it could be 50%.

Also fueling the demand is a shift towards higher-end products like chip-scale, system-in-package, stacking, and wafer-level packages, Walker said. "In the past, packaging was a labor-intensive business. Now, it's a critical part of the manufacturing supply chain," he said.

In the IC-packaging area alone, the market is projected to grow at an annual compound rate of 12.1% in terms of total shipments from 1998 to 2004, according to Dataquest.

The total market for IC packages grew 11% to 66.3 billion units in 1999 from 59.9 billion in 1998, Dataquest said. In 2000, that total will grow 15% to 76.1 billion units, and it will increase another 11% to 84.7 billion units in 2001, according to the research firm. IC packaging shipments will then 9% to 92 billion units in 2002, followed by an 8% increase to 98.9 billion in 2003. Dataquest predicts the IC package market will hit 105.9 billion units in 2004.

Chip-scale packaging--technology that houses ICs with nearly no extra space requirements--is projected to grow at an annual compound rate of 96.5% from 1998 to 2004, said Dataquest.